How do you create value? What does your organisation bring to the market and does it ultimately add value to what currently exists in your industry? This was a question that I was recently asked and as a business owner, usually it is not a question we get all that much. However, it made me reflect on our business purpose and mission and sometimes it takes some reflection to see what we add to the marketplace. Where do we start in identifying customer value?
There is a fantastic quote from Publilius Syrus, a Latin writer from the 1st century B.C. and it says “everything is worth what its purchaser will pay for it”. The more I think of it, the more I realise that for every business, it is about understanding exactly what organisations bring to the table and in today’s world of endless choice, this aspect becomes more important than ever. Value is what the customer perceives it to be and businesses need to align their approach to that mindset vs. looking internally and thinking that they understand the buyer.
To get any customer to pay for your service or product, the process is arduous in itself. Think of the typical sales process and that it usually takes up to 12 interactions with a product or service to get a customer to hook. Therefore, the risk of any customer or lead dropping off is extremely high as consumers have so much choice. Taking those 12 interactions even further, realistically any business would need to showcase real customer value early in the process and to reinforce that message throughout the entire buying process.
Therefore, knowing exactly what you and your organisation bring to the table is critical to getting from interaction #1 to interaction #12. Customer value creation is at the heart of the buying experience and if we reflect even further, that should serve as to why you start any new business.
Definition of Value Creation
To measure value, Harvard Business Review (HBR) posits that it is crucial to have a shared understanding of exactly what value is in business markets. In layman terms, it might be easier to understand what customers value specifically within your industry. If we take a simple example of Agoda which is a hotel booking platform, the customer value could be as follows:
- Having a selection of thousands of hotel options where the search process is intuitive and quick
- The ability to quickly assess pricing of hotel rooms and to understand hotel quality (through social proof)
- The ability to avoid payment up-front (for a small fee, of course)
If you think back to a few years ago, point 3 would probably not be as familiar as a customer value but in recent times, we have found it critical to the buying process for hotel rooms and trips. The recent COVID19 pandemic where the tourism industry was turned over its head has made this even more appealing. Hotel and flight cancellations went through the roof and this caused profound financial impact for consumers. Agoda’s payment feature allows us the consumer to mitigate this risk till about 1 week before the trip. The room is booked but the cost is not.
In the process, Agoda managed to understand the key customer value point and to provide a solution for it within their platform. It is not so difficult to imagine why the platform managed to capture the market. As of 2022, Agoda has a total of 2.7M hotels in 200 markets and is available in 39 languages.
Adding value to the customer has been at the centre of what Agoda brings to the table on top of the obvious fact that they connect 200 markets and 2.7M lodging providers.
So to relate it back to value creation, any organisation needs to really understand the customer’s needs and pain points and to create value in their products and solutions to plug that gap. This allows organisations to hone in to their unique value proposition and to scale that message to a larger market. In essence, marketing is all about communicating your value proposition to your ideal customer profile.
Moving the needle from taking value from customers to creating value is where we should all be moving to because this is where consumer behaviour is moving to anyway.
How to Create Value?
Step 1: Review your customer experience or the customer value map. Using a very “manufacturing approach” to value stream mapping, we can also do the same for the customer experience. When purchasing a new product or service, how easy is it to understand the product value, how easy is the purchasing process, how easy is it to find the product or service and how is the customer experience once the purchase has been made.
Consider the example of Spotify: we can see the user experience and what the emotional connections are and customer touchpoints. Really mapping this out allows organisations to understand the key customer process and to mitigate any gaps so that the experience is a good as it can be. By doing this, you have a reasonable chance of converting leads into paying customers. Not focusing on the buying experience will lead to a drop off in purchases and ultimately impact an organisation’s growth.
Step 2: Understand the needs of your Ideal Customer Profile (ICP). When you aim to segment your market, you really need to understand who you are selling to. It can’t be the entire world since that is too large of a market to focus on. Honing your focus to your ICP is really where the initial growth and revenue will come from. One key focus for ICPs is to really understand their trigger points and macro-economic effects that impact them. For example, if you’re in the travel app space, a macro-economic effect would be the post pandemic impact of travel. How does it impact your consumers? Now that most travel restrictions have been removed, what factors might impact travellers?
Honing in to your ICP’s needs is going to be critical as the message needs to be targeted and focused to their needs. If you think about large businesses like Amazon, they started selling books to folks that bought goods online. When Amazon was created, the pool of customers was not like it is today. There was a small group of people purchasing items online and Amazon focused on this ICP pool for their initial traction. Today it sells everything under the sun to everyone.
Step 3: Focus on customer success. This implies that your success is determined on the success of your customers. Monday.com explains it well. If you keep customer success at the heart of your organisation, you could have a customer for life. For example, if you’re in the space of CRM software, it could be to offer free resources, free tutorials or a customer support system so that customers feel that they have an avenue to continue growing. Whether it is HubSpot, Mailchimp or Monday.com, each organisation has an extensive resource centre to support consumers.
Lastly, it is crucial that in this step, the intention has to be genuine. Rather than focusing on click-bait resources, you should prefer to add real value to support customers. Going deep is of value in a world where most articles are short and to the point. Real consumers need more information and support to take the right action. Going all in with your consumers allows them to establish a real relationship with the business.
In the age of information and countless products, the sales and buying experience of consumer has changed for good. Businesses that aim to make a real impact in their respective industries has to focus on creating real customer value in order to provide some light to consumers in the midst of the fog. Going through step one to three should serve as a simple process to understand where you can add value and to solve customer pain points and hopefully that allows you to bring significant impact to your customers.
Selling purely based on price can be one path but I would suggest that selling based on value is more important in the long-run. We have all paid for products and services that are more expensive because we believe in the value of the product and that should be the approach of any organisation as it leads to more customer engagement and retention and that allows a business to be more successful in the long term. If you’re in it for the long term, customer value is the only path to sustainability.